International Trade Committee on Feb. 25th, 2020

[Michael Kram, Conservative, Regina—Wascana, SK]

Okay.

How much do you expect your industry to pay to the new dairy export tariff?

[Dominique Benoit]

In terms of processors, I can speak for our organization. We will not pay the 54¢ duty to export our surplus. We will not because it's not economically profitable to do that business.

Therefore, at some point, companies such as our organization will have to make a decision on whether they buy the milk or not, because if we cannot export, we need to find another home for it. The question is, what is that home for that milk?

[Michael Kram, Conservative, Regina—Wascana, SK]

Have the processors who will be paying the tariff had any consultations with the government about what the new revenue from that tariff will be used for?

[Mathieu Frigon]

We suspect there won't be any processors paying the tariff. I stand to be corrected, but that's our expectation at this point, because the tariff makes it uneconomical to export to foreign markets.

[Michael Kram, Conservative, Regina—Wascana, SK]

You said that with this new tariff in place the industry is going to have to make changes and adjust to this new reality.

What plans does the industry have, moving forward, and what can the government do to help?

[Dominique Benoit]

As an industry, we have to comply with the elimination of class 7, and the industry is working on this right now. Then we have to limit our exports of those products to the quantities that were decided.

Each and every company is now looking into its business plan to see what can be done. It's going to take investment. That's why we're looking for support to adapt to that new context.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go on to Mr. Sheehan.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you very much for the presentation today. It is very important for this 43rd Parliament to undertake this task.

During the 42nd Parliament, we began a pre-study. We heard from a number of witnesses verbally and through written submissions. Among the groups of people who presented during our pre-study for NAFTA were the Dairy Farmers of Canada. I want to hear your thoughts on this particular statement by them, and whether you agree, disagree or want to expand upon it:

Full and fair compensation, as committed by the federal government, is key to sustaining the dairy sector following concessions made in recent trade agreements. Maintaining previous import levels was the objective of dairy farmers.

They also said that compensation was the government's response to trading off the Canadian dairy sector against other potential gains in recent trade deals.

Could I have your comments on that statement? Do you agree with that?

[Mathieu Frigon]

Yes, we agree with full and fair compensation for both dairy farmers and dairy processors.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Yes, very much so.

Could you please explain this to me? I think it's important and critical for people not only in my riding of Sault Ste. Marie but across Canada to understand the importance of supply management. People need to wrap their heads around it.

In particular, when Trump made the position very clear that his objective was to dismantle supply management, that was absolutely.... I come from a steel town. When he says something, whether it's on the section 232 tariffs on steel and aluminum or dismantling the dairy sector, I take those words seriously. They're not just comments made during a trade negotiation, as some may have thought at the beginning.

How critical is the supply management system for the dairy sector? I think we have to get that on record for people who are watching on TV to understand. If he had met the goal of dismantling supply management, where would the dairy sector be today?

[Dominique Benoit]

Obviously, as a co-operative—I'll speak for Agropur and put on my Agropur hat for few seconds—we are owned by dairy farmers. Our farmers expect that supply management is here to stay. There's no question about it. I think that in every trade negotiation supply management has been put at risk.

Now the question is not if there's a deal or no deal. The question is about having fair and equitable compensation for processors. That's what we're looking for. We've been talking about it for a number of years now, and we're still waiting.

We look forward to that compensation that was kind of promised, because we're facing a lot of challenges. Now, close to 18% of our market will be supplied by imports, and we need to continue to grow as a business, as an industry. Agropur, like other processors in Canada, is looking for growth, but they need support to adapt to those trade agreements that were signed.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

It's fair to say that if Trump had his way and dismantled the supply management system, the dairy industry would be dead in Canada—or nearly obliterated—without it.

[Dominique Benoit]

The industry would suffer quite a bit.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you for that. I think it's very important for people to understand how important it is.

Stuart, I have a question for you. The first NAFTA deal was negotiated many years ago, a lifetime ago, as I call it, for a lot of people, and some of these people are in the room. Trump also wanted to have a sunset clause about every five years. The industries, all industries, said, “We've heard stability, stability, stability, and we would just be in a constant negotiation.”

With the new provision, this deal lasts for 16 years with a review every six. In six years, you can start tweaking some of those things. What is your comment on that particular provision of the NAFTA deal, please?

[Stuart Trew]

I don't have a huge amount to say on it other than it would be nice to make use of that period. It's six years away. We might actually get a period sooner, depending on how the election goes in the United States. As you've heard, we might be back negotiating in a few months. I think it would do well for us to take whatever opportunities we have, when it comes time to look at the agreement again, to see what's working and what's not working.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you very much.

My question for is for the chamber of commerce—

[The Chair, Liberal, Judy Sgro]

Actually, you don't have any time.

We'll go to Mr. Carrie.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Madam Chair.

I wanted to dig down a little deeper perhaps, Mr. Benoit. My colleague brought up the desire by Mr. Trump to dismantle supply management. You're aware the original TPP, when that was arranged, had a 3.5% TRQ versus a 7% TRQ.

If the original TPP, which would have included the NAFTA, had passed.... Basically, it was on the table to be signed 14 months before Mr. Trump was even sworn in. The Republicans had the majority in Congress and there were a lot of pro-trade Democrats who were ready to pass the deal, but it wasn't progressive enough for our guy.

If the original TPP had been signed, would your company be in a better position now? Would the sector be in a better position now, or are they better off with the new CUSMA?

[Dominique Benoit]

I think the new CUSMA added three additional impacts to the TPP.

In the TPP there was market access given to those countries, but in the CUSMA, not only did we increase the market access, because whatever was given to the TPP, including to the U.S., was maintained in TPP, but now in CUSMA we have conceded more market access. So that's one thing. Second, in CUSMA, we conceded the elimination of class 7, and third, we conceded an export cap to all the countries around the world.

For DPAC, I think CUSMA brings in three additional impacts that were not present, in addition to what was in the TPP.

[Mathieu Frigon]

Perhaps I'll add a fourth one, the oversight clauses we find in the CUSMA agreement. We provide oversight to the U.S. government on all things dairy, basically, in Canada.

[Colin Carrie, Conservative, Oshawa, ON]

I understand that government is trying to spin this as a win-win-win. I remember before the election we didn't have the economic impact studies and it was a victory for Canadians—a win-win-win. Sadly, the only Canadian lens we're getting that's up to date we got last Friday. We got the C.D. Howe report. Basically the original TPP would have been a net $4.3 billion to the Canadian economy, and the current CUSMA is going to be a $10 billion hit.

The quandary we have before us, though—pretty much unanimous, our witnesses say—is that if we don't have an agreement it's even worse than that. We are trying to come up with the implementation part of it and the support part of it because ultimately this negatively affects families and businesses and sectors, so the government does have a role in helping that transition.

I wanted you to maybe just dig down a bit more on the question my colleague asked about these caps on third parties. I would think that if the government gave away something for this agreement, they would have allowed Canadian industry to develop their products and export them in greater numbers to countries around the world.

Could you comment a bit more, if you have numbers, on the potential loss that our industry is going to suffer, because now there is a limit even on what we can sell to countries outside the CUSMA agreement? Could you dig down a little more on those numbers?

[Mathieu Frigon]

Yes, the impact would be $60 million, as we discussed earlier. As Dominique mentioned, the peculiar aspect is that it applies to all countries, and that's a first in a trade agreement. According to our legal counsel it has never happened before that an agreement between two or three countries would also impose export caps to all countries, even those that are not parties to the agreement. Definitely it will have a huge impact.

That's why the implementation date of CUSMA coming into force will have an impact, because in year one, as we mentioned in our presentation, the cap is 55,000 tonnes. Year two it drops down to 35,000 tonnes. The date of coming into force is very important.

[The Chair, Liberal, Judy Sgro]

I'm sorry. Your time is up, Mr. Carrie.

Ms. Bendayan.

[Rachel Bendayan, Liberal, Outremont, QC]

Thank you very much, Madam Chair. With your permission, I will share my time with my colleague from the Green Party so that he can ask questions as well.

As a proud Montrealer, though, I would like to turn to Mr. Leblanc, from the Chamber of Commerce of Metropolitan Montreal.

Mr. Leblanc, I was very happy to hear you talk about our Montreal companies that are exporting abroad. In my constituency, as you may know, we have Mile End, Côte-des-Neiges and Outremont, where we see more and more exporting entrepreneurs, especially in future fields, like artificial intelligence.

Do you share my view that the very existence of this modernized agreement is important in deepening our relationship with innovation centres such as San Francisco and Boston, and that it will allow our small businesses in Montreal to grow even faster?

[Michel Leblanc]

Yes, absolutely. What is more, since last year, we have been sending additional missions to those areas. One mission called Ubisoft Women in Tech went to Silicon Valley to set up individual connections.

As you said, the area of artificial intelligence has become a force in Montreal and, given American immigration policies, we are able to interest a lot of world-class talent in settling in Canada, specifically in the Montreal area. So we are in a situation where we are seeing our companies grow faster and develop relationships with the main innovation centres in the United States.

Our challenge will be to create service companies here that are able to export. That is why the access obtained through free trade agreements is so essential. If we succeed in bringing the high-quality research here to market, we must have access to those markets, and this agreement makes that possible. So it is an excellent agreement for our economic base, specifically in innovation.